Shares plunge in Tokyo and Seoul after US tech rout

Shares in Tokyo and Seoul plummeted on Friday following a decline in US tech stocks overnight, as investors grew anxious about possible regulatory changes resulting from the recent US midterm elections. The Nikkei 225 index in Japan dropped 5.1% to 56,930 points, while South Korea's Kospi index fell 8.5% to 4,923 points, prompting a 20-minute trading suspension due to the circuit breaker.

Initially, investors had welcomed the Democratic Party's decisive victory in the midterm elections, which had ousted Donald Trump's Republican Party. However, the excitement soon waned as concerns mounted about potential adverse effects on artificial intelligence (AI) data center investments. These investments were viewed as crucial for economic growth.

Among the affected US indices, the tech-heavy Nasdaq experienced its worst percentage loss in over a year, falling 5.5%, almost entirely due to a sharp drop in semiconductor stocks like Nvidia. The sell-off extended to South Korea, where memory chip manufacturers such as Samsung Electronics and SK hynix saw declines of nearly 10% and over 11%, respectively.

The tech market rout impacted Japanese companies as well, with Tokyo Electron shares down around 9% and Kioxia falling by 13%. The overall market decline was driven by fears that stricter regulations on AI technologies, triggered by the election outcome, could hinder the construction of data centers essential for AI model training and operation.

These data centers are part of a global construction effort costing hundreds of billions of dollars, and any slowdown in their development could have significant repercussions for the tech industry.